Blue Apron has a bland debut
The meal-kit delivery firm’s shares end the day where they began.
To the cheers of hundreds of employees, Blue Apron executives rang the opening bell at the New York Stock Exchange on Thursday, marking the trading debut of the meal-kit delivery company.
The newly minted public company got off to a bland start, pricing its initial shares at $10 apiece, well below earlier hopes of fetching $15 to $17. At their peak, the shares were up nearly 10% in midday trading, but they ended the day exactly where they started: at $10.
Blue Apron sells kits of preselected fresh produce, meat and fish to people who want to cook at home. Launched in 2012, it emerged as an early leader in a crowded field of rivals.
The New York company raised $300 million from the initial public offering, a smaller take than the $510 million it originally targeted. The appetite for shares seemed to diminish after analysts began questioning the company's growth projections and Amazon.com Inc. announced plans to purchase Whole Foods Market Inc., signaling the possible entry of a powerful player in the food delivery space.
In an interview with cable news channel CNBC, Blue Apron Chief Executive Matt Salzberg argued that, rather than being a threat, an Amazon-Whole Foods combination could be an ally. If the deal “can help accelerate bringing online dollars into the offline grocery world and accelerate that transition from offline to online, we think that is good for us, and good for others players in online grocery,” he said.
Some analysts were not so optimistic.
“This clearly highlights that new investors are wary of the effect of Amazon’s recent acquisition of Whole Foods on Blue Apron’s ability to acquire and retain subscribers,” said Rohit Kulkarni, managing director of private investment research at SharesPost, which focuses on growth companies.
Blue Apron said it plans to use the money it raised to boost spending on technology and marketing to continue its expansion. In his CNBC interview, Salzberg noted that Blue Apron had recently begun selling wine and cooking supplies to supplement its meal-kit business and saw additional “opportunities with different dietary preferences, different price points for customers, different cadences, different cooking occasions.”
Analysts said the $10 initial share price seemed to be a sweet spot for both the company’s ambitions and the investors’ willingness to bet on an idea that has yet to bring profit.
“I assume the underwriters found a price they believe will work to allow the highest quality investors who like the story to build positions,” said Leslie Pfrang of Class V Group, an IPO advisory firm. “How the stock does will be a function of the company’s execution towards the expectations that are out there.”
Although Blue Apron has seen tremendous growth in the last five years (revenue rose from $77.8 million in 2014 to more than $795 million in 2016), the company still posted a loss of about $54.9 million in 2016, seemingly satisfied to keep spending to fuel its expansion.
In his CNBC interview, Salzberg declined to comment on the pricing of the shares — now trading under the ticker sign “APRN” — saying, “that is really up to investors to decide.”
“We’re focused on the long term,” Salzberg said.